Project Garuda Takes Flight: First Phase of Indonesia’s Digital Rupiah Achieved

Bank Indonesia has successfully completed the Proof of Concept (PoC) for its Wholesale Rupiah Digital Cash Ledger, marking a significant milestone in the country’s journey toward the development of its Central Bank Digital Currency (CBDC) under Project Garuda. This achievement represents the first phase of Indonesia’s exploration into a digital version of its national currency, the Rupiah.

The announcement came from Bank Indonesia Governor Perry Warjiyo, who confirmed that the central bank had reached the “Immediate State” of the project. This marks the initial step in a broader initiative to develop the Rupiah Digital in response to the rapid expansion of the digital financial economy. According to Warjiyo, this move reflects the central bank’s commitment to advancing the Rupiah Digital as a response to the evolving financial landscape.

The Proof of Concept has successfully validated the technical capabilities necessary for the project, primarily through the use of Distributed Ledger Technology (DLT). Fransiskus Xaverius Tyas Prasaja, an economist at Bank Indonesia, explained that the testing phase demonstrated the ability of DLT-based solutions to meet the operational needs of the Rupiah Digital business model.

The Technical Implementation and Testing

The technical testing involved two primary DLT platforms: Corda, developed by R3, and Hyperledger Besu, developed by Kaleido. These platforms were rigorously tested through 55 different scenarios, focusing on three key business processes: issuance, redemption, and fund transfer. The testing showed that the platforms were able to integrate effectively with traditional systems, utilizing existing standards, including the widely-adopted ISO 20022 messaging standard.

Additionally, the use of smart contracts during testing improved transaction efficiency and provided enhanced flexibility for the future development of the Rupiah Digital. This highlights the potential of blockchain technology to revolutionize traditional financial operations by offering faster, more secure, and scalable solutions.

Future Phases of Project Garuda

Bank Indonesia’s whitepaper titled “Project Garuda: Navigating the Rupiah Digital Architecture” outlines the project’s future phases, which include the Intermediate State and End State. The successful completion of the initial phase positions Indonesia alongside a growing number of countries actively developing their own CBDCs.

In addition to the development of the digital currency itself, the Rupiah Digital will be integrated with existing payment systems and financial market infrastructure, allowing for both domestic and cross-border transactions. This integration is expected to further enhance Indonesia’s financial ecosystem and its ability to connect with the global economy in the digital age.

Areas for Further Exploration

While the PoC phase was a success, it also identified several areas for further exploration. These include:

• Privacy mechanisms: Ensuring secure and private transactions for users.
• Liquidity management protocols: Developing solutions for managing digital currency liquidity effectively.
• Multi-validator deployment strategies: Exploring ways to ensure that the system remains decentralized and secure.

The Road Ahead

The successful completion of this first phase of Project Garuda marks a crucial step in Indonesia’s development of its digital financial infrastructure. With the initial phase now completed, the project is set to move forward with the next steps, addressing the identified areas for improvement. The project not only highlights Indonesia’s commitment to innovation but also positions the country as a leader in the growing trend of digital currency adoption globally. As the world continues to embrace blockchain technology and digital currencies, Project Garuda serves as a promising example of how central banks can effectively incorporate these technologies into their financial systems.